FSA conduct head proposes crackdown on sales incentives
Most incentive schemes are likely to drive mis-selling and firms are not properly managing these risks, Financial Services Authority managing director Martin Wheatley has said in a speech.
After conducting a review of 11 firms’ sales practices, the regulator says firms must now more carefully consider what effects incentive schemes for sales staff will have, particularly if they encourage mis-selling.
Following a story in the Independent newspaper, several trade publications claimed the FSA intended to ban commission outright. However, Mr Wheatley made no such statements in his speech and the regulator confirmed that this is not the case.
Instead Mr Wheatley confirmed the results of a review that found widespread failings in how products are sold across the sector due to incentives being offered, most notably in banks but also across investment firms.
Mr Wheatley said: “We, as the regulator, intend to change this culture of viewing consumers simply as sales targets and I am going to be personally involved in getting this right.
“This will be part of the ongoing improvements we make to regulation as we seek to make markets work well and give people a fair deal.”
He added that many, if not all, of the recent mis-selling scandals were driven in large part by bad incentive schemes for sales.
He said: “This bonus-based approach has played a role in many scandals we have seen over the years. Incentive schemes on PPI were rotten to the core and made a bad problem worse.”
By bearing down hard on firms’ incentive policies, the FSA hopes to wipe out the large-scale mis-selling scandals which have dogged the financial services industry in recent years, including PPI. for which banks are shelling out millions of pounds in customer redress.